Decumulate & Downsize

Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.

FP: A look at three retirement income planning software packages

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My latest Financial Post column looks at a few retirement income planning software packages that help would-be retirees and semi-retirees plan how to start drawing down from various income sources: Click on the highlighted text to retrieve the full article: How you draw down your retirement savings could save you thousands: this program proves it.

There may be as many as 26 distinct sources of income a retired couple may encounter, estimates Ian Moyer, a 40-year veteran of the financial industry and creator of the Cascades program described in the article.

When he started to plan for his own decumulation adventure, five years ago, he felt there was very little planning software out there that was both comprehensive and easy to use. So, he hired a computer programmer and created his own package, now called Cascades.

While the main focus of the FP article is on Cascades, (available to financial advisors for $1,000 a year; do it yourself investors can negotiate a price directly), the article also references a couple of other programs we have looked at previously here on the Hub: Doug Dahmer’s Retirement Navigator and BetterMoneyChoices.com, the latter currently nearing the end of beta testing.

Dahmer has been writing guest blogs on decumulation here at the Hub almost since this site’s founding in 2014. See for example his most recent one, or the similar articles flagged at the bottom: Top 10 Rules for Successful Retirement Income Planning.

Dahmer says he’s pleased that others are waking up to the need for tax planning in the drawdown years: “Cascades provides a very good, easy-to-use introduction to these concepts.”

Planning for peaks and valleys in spending

Retirement Navigator’s Doug Dahmer

However, Dahmer would like an approach that doesn’t assume yearly spending remains relatively static: his Better Money Choices(available on line for $108 a year) allows for the “peaks and valleys” of spending as retirees pass through their Go-go to their slow-go and finally their “no-go” years.  Most retirees have to plan for sporadic large purchases like renovations or replacement of roofs or furnaces, plus of course vacations with widely varying price tags. Each spending peak represents a tax challenge, while the valleys are where the tax planning opportunities exist. Dahmer likens Better Money Choices to a gym monthly membership and Retirement Navigator to a personal trainer.

Personally, I found going through both firm’s programs a fascinating exercise, very much like putting together a jig saw puzzle. For me, Better Money Choices helps you visualize the final picture you’re trying to assemble, showing how much money you’ll need and when you’ll need it. Cascades provides vivid yearly snapshots of your year-by-year progress in putting the pieces together.

There’s more to Retirement than Financial Planning

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The retirement industry is starting to wake up to the fact that just because a client has achieved a certain level of retirement savings doesn’t mean that they will automatically enjoy a happy retirement.

Life just doesn’t work that way and the truth is that financial planning fails without lifestyle planning: you need to have a good handle on what you are actually saving for and why.

Our level of happiness is not determined by how much money we have; rather, it is how we choose to live our lives. In our new transition guide we have compiled a list of key attributes that if focused on will help you live longer, healthier and happier lives. By focusing on these attributes you will be well on your way to a happy and fulfilling life.

Today I would like to share some thoughts I have on one of these attributes, which is our relationship with time.

Time: Your most precious resource

“Don’t say you don’t have enough time. You have exactly the same number of hours per day that were given to Helen Keller, Pasteur, Michelangelo, Mother Teresa, Leonardo de Vinci, Thomas Jefferson, and Albert Einstein.” – H. Jackson Brown

Visiting my mother at the nursing home always reminds me that I’m getting old and every day is bringing me closer to the end. It is not a negative thought; rather, it’s an important reminder to focus and use my remaining time on this planet wisely on the things that really matter. Rushing around stressed out because I’m wasting my time is a major happiness killer for me. Watching my mother I often wonder if I am living my “why,” the best I can? Can I do better? Am I doing the best for my family?  For my friends? Am I making the world a little better?

Best Before Date

Today I’m working hard at getting into shape. My time investment is a priority of mine as it will increase the odds of me living longer, and also help push back my “best before date” increasing the amount of quality time I have at my disposal.

I view “quality time” as the period of my life when I am healthy enough to do the things I love:  golfing, fishing, traveling etc. Once you pass the “best before date” and have lost your health it really doesn’t matter how much money or time you have left because you will not be healthy enough to spend it. That’s just the way it is.

Black Swan Events

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What the first week of Retirement is really like

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By Fritz Gilbert, RetirementManifesto.com

Special to the Financial Independence Hub

I have no idea why I’m fascinated by the “First Week Of Retirement,” and I’m curious if others also wonder about it? I suspect many do and dedicate this post to those of you who wonder what the first week of retirement is really like.

Now that I’m living the first week of retirement, how would I describe it? Is it what I thought it’d be, or is it different? Is it a big deal, or just another week? Is it weird, or normal? Is it scary, or exciting?

Yes to all of that. And no to all of that.

What does Retirement taste like?

Have you ever tried to explain what something tastes like? Let’s go with chocolate, as an example. How would you describe it? What words would you use? Describing the first week of retirement is like describing the taste of chocolate. It’s really good, but it’s hard to describe.

Yeah, the first week of retirement is alot like that.

It’s good, but I can’t think of the right words to describe it. Regardless, today we’re going to try.

What the first week of Retirement is really like

Is It Like Taking A Vacation?

A Vacation In Norway. Is it like that?

As I write these words, I’m 5 days into my retirement (a true rookie). Is the first week of retirement like being on vacation? On one hand, kinda sorta, but that falls far short of describing the reality. It’s similar in that you’re off work for a few days, but it’s very, very different in the knowledge that You’re Never Going Back To Work.is

 

A Vacation that never ends will always feel different than a two-week vacation. Full Stop. So, imagine the first half of your vacation, where you’re all pumped up and excited. But you know it lasts for the rest of your life. Yeah, it’s more like that.

Only different.

I love swimming in my local mountain lake.

Is it like Saturday every day?

With less than a week of retirement under my belt, the “Saturday” analogy seems to be a better description of what the first week of retirement is really like. Like the Saturday’s you’ve experienced for decades, you’re free to do what you want to do. You’re ok letting your email go unchecked for a day or two. You can stay up later, you can sleep in.

You’ve got time to head up to the lake for that swim.

But it’s different because you know that there’s no Monday looming on the horizon.

What’s chocolate taste like?

Yeah, it’s hard to describe.

Is it scary, or exciting?

I had a friend ask me if I was “scared.” I answered that I was 98% excited and 2% scared. Sure, there’s some apprehension, but it’s a really small piece of my mindset in Week 1. At this stage of the game, I’m just learning my way around this thing called retirement, and enjoying the sensation of the very first Tastes Of Freedom I’ve worked so hard to earn. It’s only scary if you make it scary.

I know we’ll travel through many phases during our retirement journey, and I’m sure some will be more “scary” than others. We’re planning to take it all in stride. One day at a time, with some thoughts on where we want this thing to lead while leaving some freedom to enjoy the Serendipity of the thing.
You can choose what you want your retirement to be. Don’t choose scary. Life’s too short.

Choose the attitude with which you’ll live your life.

I’m choosing excited (and yeah, just a wee bit scared). Continue Reading…

Retired Money: How to be financially, physically and emotionally fit for Retirement

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My latest MoneySense Retired Money column, which has just been published, looks at a self-published book by the semi-retired (at age 64) Howard Pell. His book is titled Retire Fit, Fit & Fit. Click on the highlighted headline to retrieve the full MoneySense column: Retirement fitness involves mind and body, as well as money.

So what does the Fit, Fit & Fit mean? It’s in the headline of this blog as well as the adjacent photo taken from the book cover, which is the book’s subtitle. So it’s referring to being all three of financially fit, physically fit and emotionally fit for Retirement.

There are plenty of books about financial fitness so Pell pays only lip service to that aspect: what he brings to the table is insights on how to integrate finances with physical and emotional fitness. (To some extent, so does the book I co-authored with Mike Drak: Victory Lap Retirement)

Pell, who is based in Waterloo, Ont., does add a few newish terms to the semi-retirement lexicon.  He dubs the lifestyle “voluntary unemployment” but like many at this stage, finds the word “retired” inadequate. He tosses out several alternatives but the best one is his suggestion to simply adopt the Spanish word for “retired,” which is Jubilado (for males) or Jubilada (for females.”) He would use the term to signify anyone who is financially, physically and emotionally fit.

I can certainly relate to his observation of the semi-retired life that  “The big difference is that now all my deadlines and commitments are self-imposed.” Of course, as the old quip goes about driven self-employed business people: “My boss is a slavedriver.”

Pell also went personally through the “glide path” to semi-retirement described in other Retired Money columns and here at the Hub, via working a three-day week for his then employer during the last two years of his time there. This is a good way to test out your financial fitness while also clearing time for more physical fitness and — perhaps the toughest challenge — preparing for emotional fitness for retirement (I’m speaking for myself here.)

Finding the sweet spot

A Venn diagram on page 7 of Pell’s book (shown adjacent) illustrates that the sweet spot is the intersection where financial, emotional and physical fitness all converge.

If they don’t, and you became financially fit by selling out either your physical and/or your emotional health, the retirement your finances make possible may be a very limited and unsatisfying one.

It’s also possible to be only physically fit or only emotionally fit but lack the financial resources for retirement. The need to keep working to pay the bills will be frustrating, especially if all your peers have retired.

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The reverse mortgage pitfalls you need to know about

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Canadian seniors may borrow on their home equity in the form of a reverse mortgage — but should they?

Money lenders are always coming up with innovative ways for you to borrow money. One such innovation is the reverse mortgage. Interest in reverse mortgages is rising with an aging population and low interest rates on savings accounts. As a result, we hear from our Inner Circle members periodically asking whether a reverse mortgage would be a good way to tap into the equity they have built up in their homes.

Reverse mortgages in Canada let homeowners who are 55 years of age or older borrow on their home equity—the minimum age was 60 until a year ago. (For married couples, both spouses must be above age 55). Typically, the loan-to-value ratio is up to 40%. But depending on their age and property, some borrowers may qualify for a loan of up to 55% of the value of their home. The loan and accumulated interest are repaid only after the house is sold or from the proceeds of the homeowner’s estate.

Reverse mortgages are best seen as loans of last resort

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